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Proposed bill would force Telstra to break up

Charging that Australia’s current telecom sector has been “widely criticized as being cumbersome,” a top Australian government official unveiled a bill this week that would require Telstra, the nation’s largest telecom service provider, to separate structurally its wholesale and retail operations. Steven Conroy, Australia’s Minister for Broadband, Communications and the Digital Economy, announced the proposed legislation on Tuesday as officials continue talks with Telstra and its competitors on Australia’s planned US $37 billion National Broadband Network (NBN). A potential sticking point in these discussions concerns financial and other terms under which Telstra and its rivals would contribute their network capacity to the NBN. Supporters of the bill contend that a functional separation of Telstra would enable Telstra and its competitors to participate in the NBN initiative on a more equal footing. While emphasizing “the government’s clear desire for Telstra to . . . separate on a voluntary and cooperative basis,” Conroy said the legislation would impose a “strong functional separation framework” on Telstra if it fails to come up with an acceptable plan on its own. That framework, according to Conroy, would require Telstra to conduct network operations and wholesale functions at “arms length” and provide wholesale access to its network under the same prices and terms given to Telstra’s retail customers. Such terms must also be made “transparent to the regulator and competitors via strong internal governance structures.” The government would also refuse grants of additional wireless spectrum to Telstra until structural separation is completed. Voicing dismay that “the government has felt it necessary to introduce this legislation,” Telstra CEO David Thodey said his company nonetheless “remains committed to . . . find a solution that is in the best interests of the industry, the nation, Telstra and our shareholders.”

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